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Raymond James CEO: AI will ‘become a bigger part' of the financial industry

Raymond James CEO Paul Reilly joins Yahoo Finance Live to discuss recruiting activity, the company’s technology initiatives amid the AI wave, growth, and the outlook for the economy from a corporate standpoint.

Video transcript

JULIE HYMAN: Well, as some firms across the financial industry face the layoff wave, there is some light. Some companies are hiring. One of them is reportedly Fidelity announcing it's set to hire 4,000 workers in the first half of 2023, and Raymond James is seeing recruiting activity remain strong across all of its affiliation options.

Joining us now to discuss the labor picture and much more is Paul Reilly, Raymond James CEO. Paul, it's great to see you in person. Thanks for coming in.


PAUL REILLY: Yeah, it's great to be live. Great digs here.

JULIE HYMAN: Yeah, thank you. Appreciate it.

So you have consistently talked to us about getting good people in and that that has helped your growth. Where are you in the hiring picture right now, and how do you see it sort of industrywide as well and how you relate to the industry?

PAUL REILLY: Well, first, our recruiting has been very, very strong and continues to be. So our backlog or people visiting the home office from other firms continue to be very strong. So part of that's the platform is we, I think, have industry-leading technology for the advisors, and our culture is still being advisor centric. Tell them they own their clients. They can leave if they want.

So that culture-- our regretted attrition has stayed under 1%. So the people there that are happy help us recruit other people. So recruiting has been very, very good, and the same on the employee side. Where other people are laying off in some firms, we're still hiring because of the growth and that we're service oriented. You know, we're continuing to recruit and hire people.

BRIAN SOZZI: Paul, the buzzword today is artificial intelligence. How do you see this impacting what advisors do and what you do at the company over the next decade?

PAUL REILLY: We're already using parts of artificial intelligence. You know, we have-- we use AI in our platform. So when advisors get up every morning, they have a thing called opportunities, and it talks about what's happening in portfolios as kind of warning messages, or here's an opportunity. This bond is coming due. This portfolio is out of drift, and here's recommendations. They get to decide what they do with their clients, and it helps them get through and figure out what's happening with their clients.

So it'll continue to be used. It's very, very helpful to the advisor, and it's helpful to us in terms of support to see things that are going on or supervision or compliance. So it will become a bigger and bigger part of the industry, but it's already here.

BRAD SMITH: And I guess the add-on question to that too is how does that change the structure of someone's pay, of someone's compensation? If we have so much productivity that AI can add on to an operation on a day in, day out basis, that's less of a task that perhaps somebody has to then account for in their day-to-day activity.

PAUL REILLY: Well, one of the secrets we've had in our lack of turnover is we've changed, I think, our advisor payouts to any degree once in eight years. I mean, so we're very, very consistent.

So yes, it helps in the back office. It helps in those support costs. But, you know, we view if the advisor-- the more successful they are, that means their clients are happy and the more successful we are. So that part of the equation we really haven't changed, but certainly from a support standpoint, through processing we're using artificial intelligence in forms. Almost all of our forms are smart forms now and get through process. So that helps the advisor because once they fill out the form, they know it's going through, and it helps them be able to track it, and it helps it get through to the end. So that is cost savings and better service.

JULIE HYMAN: Paul, we've been talking to a lot of executives. We talked to the Cisco CFO earlier today about where we are in the economy right now because it's confusing, right? We get a lot of conflicting economic data, but there does seem to be a little bit more optimism that a hard landing, maybe not even a soft landing, maybe not a recession at all is coming our way. What do you think?

PAUL REILLY: Well, first, it's hard to tell, right? So we've always been conservative. And even with much more capital than most of our peers, double the well capitalized, we continue to have top returns. So you have to look long term.

And what gets you in cycles are the unexpected, right? And this is certainly a period where I could paint a picture. Hey, economy will be great. Certain factors could happen with inflation. Interest rates-- I started out in the late '70s. I watched them go double digit, which would have the other effects. So from a corporate standpoint, we stay flexible.

But in terms of the economy, it's hard to have a recession when people have jobs. And, you know, although hiring people has been easier, it's still an employees' kind of market. So if people are wanted and they have jobs, it's hard to have a recession if they have money to spend. So that is counterbalancing. And unless inflation stays rampant-- which it's coming in-- you know, I think the economy will do OK.

BRAD SMITH: And I guess the other question around that is, you know, it's relative strength for some of the more kind of resilient parts of the consumer equation, but then you have some parts, especially in the subprime or near-prime credit scores, where there is some deterioration that's been acknowledged. How does that kind of differ, and how do we avoid a further divergence in the economic scenario as well?

PAUL REILLY: Yeah, so the concern there, you know, the have and have nots, the people who are on the lower economic scale who are struggling and the government funds help them that's going away, they'll be the folks that run out of money first, right? So that part and that lending, luckily it's not very leveraged today compared to other cycles. But if they don't have the income and the jobs as costs get higher, they're the ones that are threatened.

So that's why I think it is-- the Fed's doing the right thing of battling inflation. May not be popular in my industry, and they really don't care about the stock market. They care about getting inflation down, which I think for society is a good thing over time. So although we talk about how high rates are right now, historically they're still not all that high, and certainly consumers and corporations have to adjust to a 5% rate. You know, for half of my career, they were higher than that. So it's just been recent that they've really been lower.

BRIAN SOZZI: Always enjoy the discussion with you. Raymond James CEO Paul Reilly, thanks for coming to the studio. Good to see you in person.

PAUL REILLY: Thanks, Brian. Good to see you.

BRIAN SOZZI: Appreciate it.